LITTLE ROCK, Ark. (AP) - A University of Arkansas at Fayetteville report on its fundraising division's $3.37 million deficit found "overwhelming" evidence of "lack of management oversight, noncompliance with university policies and procedures and deliberate efforts to disguise poor financial management."

The four-page report by university treasurer Jean Schook written Oct. 19, released Friday along with 84 pages of other documents in response to a Freedom of Information Act lawsuit filed by the Arkansas Democrat-Gazette.

Much of Schook's report criticized Vice Chancellor of University Advancement Brad Choate as providing "essentially no oversight of the financial activities of the division." Instead, the report said, he handed over financial supervision and spending authority to his budget director, longtime university employee Joy Sharp.

Choate's written response, contained in the university's release Friday, denied claims he poorly supervised the Advancement Division's financial activities, and he blamed the budget problems on a failure of the university's "checks and balances."

"I provided significant oversight of the financial activities of the Division," he wrote. "However, the two systems of checks and balances that all senior administrators rely on - the long-time budget officer in Advancement and the University's own mechanism for validating that budget officer's accounting - both failed."

Choate, in an email, declined further comment. Sharp could not be reached for comment.

On the basis of information in the Schook report, Chancellor G. David Gearhart informed Choate and Sharp in early November that their appointments would not be renewed after June 30.

He removed Choate from administrative duties and asked the vice chancellor to concentrate on fundraising but didn't cut his $348,175 annual salary.

Sharp was paid $91,086 annually as budget officer, but Choate reassigned her within the Advancement Division last summer before the deficit inquiry was completed and cut her pay to $68,314, according to university officials. Later, she was reassigned to the human-resources department.

When university officials learned in early July that the Advancement Division had significantly overspent its roughly $10 million budget, the report said, "it was clear neither (Choate) nor (Sharp) could provide reasonable answers to budget or expenditure questions as the magnitude of the problem was being ascertained."

Just as university officials have said since December, the treasurer's report found "no evidence of intentional acts to misappropriate resources for personal gain."

However, the report cautions that "a review of accounting records specifically to identify misappropriated resources has not been performed and (it) will likely be some time before staff resources are available to conduct such a review."

In Choate's four-page response to the report, written Oct. 20, he blamed Sharp for the overspending, saying she was "quickly identified" as "the source of the problem."

"Joy clearly became overwhelmed with the duties of her position as the complexity of the budget grew over the years and ultimately worked to deceive us," he wrote in e-mail to Gearhart and Don Pederson, vice chancellor for finance and administration. "As hard as that is for me to accept, the evidence makes that clear: Once she found she was unable to manage the budget accurately, she took a series of actions over several years to conceal her mismanagement."

Sharp's five-paragraph response cast no blame on Choate, never mentioning him, and includes an apology. "I deeply regret that through my lack of performance I have caused this problem."

Sharp acknowledged that she did not provide timely budget reports "due to my workload." She wrote that she did not monitor revenue correctly and that "when the revenue decreased I did not adjust my projections accordingly."

Sharp said she would "never intentionally try to damage the University of Arkansas in any way."

Echoing a prior e-mail UA released in December, Choate expressed a desire to keep the deficit quiet. Choate complained Sept. 26 to Gearhart that he heard two development employees had conferred about the budget situation.

"I don't know who else he has talked with. It would probably be better to keep this info among those with need to know," he wrote Gearhart.

Gearhart responded: "Rumors are quite rampant. I think you will find knowledge to be very widespread. ... I did not lie about the problem but rather was direct with (the employee). I don't plan on keeping it a secret from anyone who asks me."

After he received the treasurer's report Oct. 19, Gearhart vented in an Oct. 20 e-mail to Choate:

"Brad, it appears that you had no idea how much revenue you had or how much your division was spending and this went on from the first day you arrived on campus. ... You were told by (Pederson) that you had to approve expenditures of a certain level and totally ignored this requirement and even argued about the necessity. You did not follow strict university policy, even after (Pederson) told you it was required. In fact, you ignored the policy directive as if the rules don't apply to you.

"While we do not suspect theft, you created an environment where it would have been very easy for her (Sharp) to steal the university blind if she had desired to do so. No one else created this environment but you.

"Brad, you have been a friend and colleague for many years. I brought you here to help me. But your lack of oversight has created a colossal fiscal crisis."